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Mall of America breaks ground on expansion

Officials at the Mall of America officially broke ground Tuesday on a major expansion, including a new luxury hotel.

The project is expected to cost more than $300 million, and will be the biggest expansion since the mall opened in 1992.

The expansion will boost the entire state's economy, said Minnesota's commissioner of employment and economic development, Katie Clark Sieben.

"This project will leverage $1.5 billion in private investment and will create thousands of new jobs in construction, retail, tourism and hospitality," Clark Sieben said. "The Mall of America's expansion will also attract an estimated 20 million additional visitors every year."

The expansion includes a JW Marriott hotel on the north side of the mall, opposite the Radisson Blue that opened a year ago.

There will also be 150,000 square feet of new retail space, an office building, a new upscale dining area and an underground parking ramp.

This is an architect's rendering of the expansion the Mall of America.Image courtesy Mall of America

The amenities are expected to include dozens of new stores, a new atrium for public events and exhibition space.

The addition, which is expected to be completed by 2015, may be a prelude to an even bigger expansion: the mall's owners have been talking about a $2 billion so-called "Phase 2" into the old Met Center parking lot between the mall and Interstate 494.

Owner Triple Five Worldwide says that expansion will more than double the space of the existing mall.

Fanfare aside, local malls have struggled in the Internet age.

Brookdale, in Brooklyn Center, fell to the wrecking ball in 2011. Bloomingdale's pulled out of the Mall of America in 2012 and Gaviidae Common in Minneapolis lost upscale retailer Nieman Marcus last year. Retailers like Best Buy, just up the road, have struggled against Amazon.

"The key to survival is exactly what we're doing. And that's to continuously reinvent and add and make things exciting," said Paul Ghermezian, chief operating officer with Triple Five.

"If you're just going to be about shopping, it's not going to work," said Ghermezian, whose family developed the Mall of America.

Some also question the project's public cost.

The expansion is being funded by a $250 million tax subsidy, meant to pay for infrastructure for the expansion.

The money comes from the fiscal disparities tax redistribution program, which was set up in 1971 to help share the commercial tax base through the seven-county metro area.

It was intended to encourage communities to accept low-tax developments like parks and help spread the benefits of economic growth.

But the subsidy that sparked the mall's expansion is a bad precedent, said Sean Kershaw, executive director with the St. Paul-based civic group Citizens League.

"Because the source of these funds are commercial tax base," Kershaw said, "the Mall of America is essentially asking for its commercial competitors to fund its expansion."